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Stocks Rise as Volume Expands, but Late Day Selling Sours the Day

The market got a major dose of economic news this morning. Case-Shiller released its reading on the housing market and although prices fell again they did not fall as much as expected. Good news, relatively speaking. Stocks were able to climb off session lows, but were knocked back lower with a VERY troubling Consumer Confidence reading well below estimates. Consumer confidence has not been this low since April of 2009! Again, buyers were able to step up to the plate and power stocks higher. Volume ran higher on the day, but was below average. June lows provided some resistance at the end of the day when the NASDAQ tried to breach the lows, this is an area to watch. A good day with a bit of accumulation, but there is much more work this market needs to do.

There are plenty of bottom callers out there indicating the lows are in for the year. Why not, from peak to trough the S&P 500 was down 19% and small caps were down more than 20%. Enough for a correction right? Perhaps, but the issue we are seeing and we have been worried about is the lack of accumulation in the market and leadership. Institutions are not getting involved here as volume continues to indicate. We have a few leading stocks breaking out from bases, but these bases are very wide and loose. Given the market context, yes these patterns fit the mold, but they are far from what you would like to see in a new uptrend. Sound bases and quality leadership is needed and unfortunately we aren’t there yet.

We are counting the correction since the beginning of May. Three months worth of a correction can be okay, but the amount of distribution seen in the market and the lack of accumulation on the upside certainly has us very cautious about the current environment. The NASDAQ now has pushed up into the June lows which will and is acting as major resistance. Not too mention we have Non-Farm payroll figures coming this Friday. Given the numbers we have seen out of ISM this report Friday will be very interesting to see. Right now we have a few longs working and a few short setups emerging. We’ll be ready to pounce as needed.